Regions 2Q net income falls 9 percent as costs increase

Jul. 23, 2013

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Staff reports

Regions Financial Corp. on Tuesday reported a 9 percent drop in second-quarter profit as expenses increased while the bank wrote fewer mortgage loans.

The results fell short of Wall Street projections, and shares fell in pre-market trading.

The regional bank — which ranks as the largest bank in Middle Tennessee in terms of market share — reported net income after paying preferred dividends of $259 million, or 18 cents a share, for the three months ended June 30. That compared with $284 million, or 20 cents a share, in the 2012 second quarter.

Total revenue fell to $1.31 billion from $1.35 billion last year.

Analysts, on average, were expecting earnings of 21 cents per share on total revenue of $1.31 billion.

Net interest income, or earnings from deposits and loans, totaled $808 million for the quarter, down nearly 4 percent from $838 million last year.

Earnings from fees and other charges, known in the banking industry as non-interest income, totaled $497 million, down 1 percent from $507 million a year ago. That reflected a big drop in mortgage income and declines in credit card income and securities gains, partly offset by a jump in investment fee income and improved earnings from insurance commissions and fees.

Noninterest expenses rose 5 percent to $884 million, mainly due to losses on early debt payoffs and increased salaries and benefits. Total head count increased during the quarter as the company added staff to its investment services division, part of its wealth management business.

The company said that it began a program to reduce costs in other areas during the quarter.

Total deposits fell 3 percent to $92.45 billion from $95.1 billion last year.

Total loans slipped nearly 2 percent to $74.99 billion, with growth in commercial loans offset by a decline in home mortgages, home equity lending and credit cards. Mortgage production dropped 7 percent from the 2012 quarter.

The bank set aside $31 million to cover soured loans, up 19 percent from $26 million last year.

The parent of Regions Bank wrote off $144 million in loans considered uncollectable, down 46 percent from $265 million last year. Nonperforming assets, or loans in danger of default, slid 27 percent to $1.7 billion from $2.33 billion last year.

Shares of Regions Financial lost 12 cents, to $10.30 in morning trading. The stock closed Monday at $10.42, up 46 percent since the start of the year and at its highest point since the 2008 financial crisis.